In the beginning, came the user test. The digital currency passed it, as many companies and organizations began to accept Bitcoins as a medium of exchange. According to Bitpay.com 12,000 businesses and charities accept Bitcoin, including the University of Nicosia (Unic), the largest private university in Cyprus, as discussed in a previous piece.

Politicians and investment bankers took notice. Former U.S. congressman Ron Paul said it could be an alternative to the US dollar; and Bank of America set a price target on the virtual currency.

Bitcoin survived and thrived. But then came the test of central bankers– and Bitcoin failed it. Last December, Bank of France gave a strong warning concerning the risks of the virtual currency. The People’s Bank made an even stronger case against the virtual currency, in three ways. First, by banning financial institutions from conducting business in Bitcoins. Second, by requiring that Internet sites register Bitcoin transactions with appropriate government agencies. And finally by educating the public of the risks of investing in Bitcoin.

The third and perhaps most important test comes today: Mt. Gox, the most important institution in the history of Bitcoin, has vanished. This leaves Bitcoin participants without an exchange mechanism to set Bitcoin prices, providing liquidity at the same time.

While it is still too early to determine what went wrong with Mt. Gox, and whether it will be up and running soon, we nonetheless believe that the digital currency will survive this test, too. For a simple reason: Bitcoin is an innovative currency; and innovators usually find the means to overcome the impediments that get in the way.

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